Hotel data tax infuriates industry lawyers

It looks like Gov. Rick Scott, an advocate of low taxes and pro-business policies, has an issue bubbling up at the Department of Revenue.

Sometime within the last 18 months, the DOR began collecting a tax on hotels and restaurants across the state. Normally, that wouldn't be news because that's what Revenue-ers do – they collect taxes.

But in this case, no one saw it coming.

Industry officials claim DOR has created a new tax, based on a sketchy reading of the gloriously mis-named Communications Services Tax Simplification Law.

That legislation was supposed to streamline the law creating a tax on communication services – things such as internet service providers or satellite television service.

Instead, the industry says, it's being used by the Department of Revenue to tax the data sent from a hotel or restaurant franchisee back to the corporate mother ship. In essence, treating your local Hampton Inn as if it were Verizon or Sprint.

The apparent justification?

Well, hotels routinely transmit information about things such as occupancy levels and room rates back to the parent organization. It travels through something called a virtual private network.

DOR appears to be taxing the hotels as service providers, even though the lines are owned and controlled by companies like Comcast and AT&T.

This has puzzled, frustrated and/or infuriated industry officials. Here's what Richard Turner, the general counsel of the Florida Restaurant and Lodging Association, wrote in a recent memo to association members.

"I challenge anyone to tell me the last time they sought out a national hotel or restaurant chain to obtain their communication services. The question is what type of 'provider' was the Legislature referring to when they wrote the law? I am going to step out on a limb and suggest they were probably thinking in terms of companies that actually provide communications services and networks, not hotels or restaurants."

As much as folks like to complain about government, I've found truly absurd behavior is fairly rare. When you peel back the layers of an action that seems silly, there's often a reasonable explanation. So I asked a Department of Revenue spokesman about how the law is being applied. The response was less than illuminating:

"We administer the law according to the definitions for communications services that have been established in law. This is done on a case-by-case basis depending on the facts of the specific taxpayer."

If I didn't find that satisfying, consider how Debbie Knight must feel. Knight is the chief financial officer for a Radisson at Port Canaveral and a Four Points by Sheraton in Cocoa Beach.

She's been trying for months to understand why, after a routine tax audit, the state said her company owed $138,000 in communications services taxes. Other properties have been hit with similar amounts.

"We've been back and forth to Tallahassee since March on this," said Knight. "But we've gotten nowhere."

A few weeks ago, Gov. Scott was in Orlando as part of his "It's Your Money" statewide tour – that's the trip the governor took to ask voters where he should roll back taxes.

Tom Williamson, who heads up the Cocoa Beach Hotel & Lodging Association, said the communications tax – which he said is being applied "creatively, and we feel illegally" – was the perfect place to start. Williamson, in fact, said the very thing the DOR was taxing – the information moving through lines – was specifically exempted by Florida law.

"We've all been struggling with this," he said. "We just don't see how it makes sense, and we haven't been able to get anyone to explain how it does."

I sent the Governor's Office an email about the issue Friday. The response? The governor is aware of the industry's concerns and is looking into it.